Dhaka, Bangladesh (BBN)- Bangladesh government has finalized the formation of the proposed ‘Combined Islami Bank’, merging five Shariah-based troubled banks.
The process reached its final stage with the appointment of administrators, who are set to take charge of the respective banks this afternoon (Wednesday), officials said.
Meanwhile, the central bank has already dissolved the boards of five Shariah-based banks as part of a major move to merge them into a single large Islamic bank.
The central bank called the board of directors of the struggling unconventional banks on the day and shared the decision to dissolve their boards as part of the ongoing merger move by the regulator.
The Bangladesh Bank (BB) high-ups congratulated the board members for their time and energy in operating the banks in this critical period of time.
Emerging from the meeting, the chairman of the just-expired board of directors of First Security Islami Bank, Abdul Mannan, told the reporters that the banking regulator dissolved the bank's board like others with floral appreciation for their responsibilities.
"From now on, we have a role in the bank," he said.
Two banks -- Union and SIBL-- have full-fledged managing directors and have also been discontinued their contacts, while others have managing directors (current charge).
BB Governor Dr. Ahsan H. Mansur is set to hold a press conference in the afternoon, where he is expected to inform the media about the next course of action in detail.
Under the central bank’s directives, each bank has been assigned an administrator. After taking charge, they will initiate the first phase of depositor protection measures, disbursing up to BDT 200,000 per depositor from the Deposit Protection Fund.
Capital Structure of the Combined Bank
The merged entity will have a combined capital base of BDT 350 billion. Of this, BDT 200 billion will come from the government, while BDT 150 billion will be converted into shares for depositors.
Currently, the five banks together hold deposits worth BDT 1.42 trillion against loans amounting to BDT 1.93 trillion, of which BDT 1.47 trillion, or 76 per cent, are classified as non-performing.
The five banks collectively operate 760 branches, 698 sub-branches, 511 agent banking outlets, and 975 ATMs across the country. Among them, Union Bank has the highest default rate of 98 per cent, followed by First Security Islami Bank (97 per cent), Global Islami Bank (95 per cent), Social Islami Bank (62.30 per cent) and EXIM Bank (48.20 per cent).
Depositor Protection and Payout Plan
Officials said the primary goal of the merger is to safeguard depositors’ interests. In the first phase, each depositor will receive up to BDT 200,000 from the Deposit Protection Fund. Those with deposits exceeding that amount will get the remainder in subsequent phases, financed through the government’s capital injection, new deposit mobilization, and loan recovery.
For term deposits, the principal amount will be repaid with a 4.0 per cent profit rate, while savings and current account holders will receive their full principal amounts. The banks have recently been struggling to return deposits on time.
Appointment of Administrators
The appointed administrators are currently in the process of being finalized, but the possible administrators are as follows:
EXIM Bank: Shawkatul Alam, Executive Director, Bangladesh Bank
Social Islami Bank: Salah Uddin, Executive Director, Bangladesh Bank
First Security Islami Bank: Muhammad Badiuzzaman Didar, Executive Director, Bangladesh Bank
Global Islami Bank: Md. Maksuduzzaman, Director, Bangladesh Bank
Union Bank: Md. Abul Hashem, Director, Bangladesh Bank
Their initial task will be to provide all relevant data required for the merger process. A dedicated office has been set up at Senakalyan Bhaban in the capital, where central bank officials will coordinate and consolidate information to facilitate the smooth formation of the new Combined Islami Bank.
BBN/SSR/AD